Are LIFO inventory amounts ever written-up to their market value? LIFO inventory amounts will not be written-up, even when the current market value of the inventory is far greater than the amount reported on the balance...
Are LIFO inventory amounts ever written-up to their market value? LIFO inventory amounts will not be written-up, even when the current market value of the inventory is far greater than the amount reported on the balance...
What is the entry when merchandise has been received but not the vendor's invoice? Definition of Merchandise Received but Not Vendor’s Invoice If a retailer receives merchandise from one of its vendors, but has...
How do you calculate the cost of carrying inventory? Definition of Cost of Carrying Inventory The cost of carrying inventory (or cost of holding inventory) is the sum of the following: Cost of money tied up in inventory,...
Where do you account for payroll taxes on the income statement? Definition of Payroll Taxes Payroll taxes are based on the wages (salaries, commissions, bonuses, etc.) of a company’s employees and on a self-employed...
How do you calculate the average balance in accounts receivable? The average will be more representative if you include additional balances in the computation. For example, if you compute the average balance for the year...
liability. When a company receives money in advance of earning it, the accounting entry is a debit to the asset Cash for the amount received and a credit to the liability account such as Customer Advances or Unearned...
What is the advantage of issuing bonds instead of stock? Definition of Bonds Bonds payable are a form of long-term debt, which include a formal agreement to pay interest semiannually and the principal amount at maturity....
costs because they are not assigned to products, and therefore cannot be included in the cost of items held in inventory. If a selling, general and administrative (SG&A) expense is prepaid, the prepaid portion will...
on December 31 has a prepaid expense if on December 1, it paid $6,000 for insurance coverage from December 1 through May 31. Recording a Prepaid Expense A prepaid expense can be recorded initially as an expense or as a...
Where can I get official information for federal payroll taxes? For official information on federal payroll taxes we recommend the Internal Revenue Service Publication 15 which is known by two names: Circular E and...
Financial Statements Video Training Part 11 Connection between the income statement and balance sheet Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your current job...
Why are average balance sheet amounts used in calculating the turnover ratios? In the calculation of a turnover ratio, the numerator is an amount from an annual income statement, while the denominator is a balance sheet...
What is meant by the term relevance in accounting? Definition of Relevance In accounting, the term relevance could mean one of the following: An amount, disclosure, etc. that will make a difference to the decision maker...
How do you divide the cost of real estate into land and building? Dividing the Cost of Real Estate into Land and Building In accounting, the cost of real estate must be divided into: The cost of land (because land is not...
Bookkeeping Video Training Part 6 Adjusting entries: recorded in the general journal, deferral of prepaid expenses Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your...
Is there a difference between the accounts Purchases and Inventory? Purchases Account Under the Periodic Inventory System The general ledger account Purchases is used to record the purchases of inventory items under the...
How do I determine the cost of missing inventory? Definition of Determining the Cost of Missing Inventory The approximate cost of missing inventory is the difference between 1) the cost of the inventory items that are...
In a bank reconciliation, what happens to the outstanding checks of the previous month? Definition of Outstanding Checks Outstanding checks are checks written by a company, but the checks have not cleared the bank...
Financial Statements Video Training Part 9 Income statement: revenues, cost of goods sold, expenses, nonoperating items Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your...
What does it mean to check the extensions and to foot an invoice? To check the extensions on a purchase invoice means to verify that the number of units of each item multiplied by its unit cost agrees with the total...
Isn't objectivity violated when estimates are used in bookkeeping and accounting? The use of estimates does not necessarily violate objectivity. If it is not possible to determine the exact amount of an expense and/or...
What is recorded in the Wages and Salaries Expense account? Definition of Wages and Salaries Expense The account Wages and Salaries Expense (or separate accounts such as Wages Expense or Salaries Expense) are used to...
such as gasoline. The delivery surcharges should not be reported as nonoperating revenues or other income. Nonoperating revenues or other income items would be outside the main activities of the retailer and...
What are some of the accounting courses in a college accounting degree? The accounting courses often included in a 120- or 150-credit college accounting degree are: fundamentals of financial accounting fundamentals of...
inventory system in which the purchases of goods are recorded in the general ledger balance sheet asset account Inventory. When goods are sold, the Inventory account is reduced and the amount is recorded in the general...
is the cost of goods on hand, it makes sense to relate it to the cost of goods sold. Assume that during the past year a company’s inventory had an average cost of $10,000. (This was the average of the amounts in the...
). The company will record a December 31 accrual adjusting entry which debits Interest Receivable for $300 and credits Interest Income for $300. The Interest Receivable account balance will be reported on the company’s...
Where can I find financial ratios for my industry? One source for financial ratios by industry is the RMA Annual Statement Studies Financial Ratio Benchmarks. RMA is the acronym for Risk Management Association and...
Is the direct method still used in the statement of cash flows? The direct method is one of two methods allowed for preparing the statement of cash flows (or cash flow statement). The direct method is recommended by the...
What is the difference between an invoice and a voucher? Definition of an Invoice An invoice received from a vendor is a billing for goods or services that it had provided. The vendor’s invoice will include the...
How should the sale of gift certificates be recorded in the general ledger? Definition of Gift Certificates Gift certificates (and gift cards) are often sold by a retailer to a buyer for cash. The buyer can then redeem...
Is a security deposit for a rental agreement recorded in a liability account? The person paying the security deposit would credit the asset account Cash and would debit the asset account Security Deposits. The person...
What is a limitation of the inventory turnover ratio? Definition of Inventory Turnover Ratio The inventory turnover ratio is often calculated by dividing a company’s cost of goods sold for a recent year by the average...
In adjusting entries, how do I know which T-accounts to use? We illustrate the common adjusting entries with the use of T-accounts in the Explanation of the Topic Adjusting Entries available for your reading at no...
What is the difference between entries in a general journal versus a general ledger? Definition of General Journal The general journal is described as the book of original entry. Today the general journal is used to...
How do you account for payroll withholdings for health insurance? Definition of Payroll Withholdings for Health Insurance Payroll withholdings for health insurance are the amounts deducted from employees’ pay for their...
Where in the chart of accounts is a suspense account located? Suspense Account in the Chart of Accounts A suspense account could be located in any one of these sections of an organization’s chart of accounts: Asset...
Can a cost be both a direct cost and an indirect cost? A cost can be both a direct cost and an indirect cost. One of many examples is the cost of a supervisor in a department within a factory. Let’s assume that Sam...
What is the difference between an invoice and a statement? Definition of an Invoice An invoice received from a supplier shows the items purchased, the cost per unit, the total cost or extension of each item, the total of...
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